In risk management, what does the term 'residual risk' refer to?

Residual risk is the term used in risk management to describe the level of risk that remains after security controls and mitigation strategies have been implemented. In other words, it is the risk that an organization still faces after it has taken steps to reduce the likelihood or impact of potential threats. The understanding of residual risk is crucial for organizations as it helps them make informed decisions about how much risk they are willing to accept in relation to their overall risk appetite and strategic objectives.

When organizations apply controls—such as technical safeguards, procedural safeguards, or administrative measures—these controls help reduce the risks associated with various threats and vulnerabilities. However, complete elimination of risk is often impossible, and thus some level of residual risk will always exist. This understanding allows organizations to effectively allocate resources towards further mitigative strategies where necessary, and it encourages continuous reassessment of risk in response to changing environments and threats.